What is Consumer Debt?
Consumer debt is defined as any debt incurred as a result of purchasing goods with the expectation that you or someone else who owes the debt will pay them off. Most of the purchases basic consumer goods and services, and consumers are left to pay off the costs of the products and services over time. While consumer debt can offer certain conveniences, too much debt leads to trouble. Consumers who take on too much debt could face harassment from debt collectors, negative credit report entries, and serious financial and legal issues.
There are three common types of consumer debt. The first is revolving debt, such as credit cards, retail accounts, or other lines of credit. With a revolving account, you borrow an initial amount without paying any principal. Instead, the lender charges interest. So long as you keep paying, the lender may continue to give you more credit. When you reach your limit, you can no longer borrow any additional funds.
The second form of consumer debt is installment debt . Installment debt is a fixed loan, such as an auto loan or a personal loan with a specific dollar amount allotted to you. Generally, you must pay off the loan by a certain amount of time, and you are expected to make fixed payments until the debt is paid off. The lender may charge a higher interest rate, depending on your credit score.
The third kind of consumer debt is unsecured debt. Secured debt like revolving and installment debt are typically secured by real property like the home or an auto. Unsecured debt like credit cards or payday loans are unsecured because the lender has no guarantee that the debt will be paid. In exchange for taking on more risk, the lender charges a higher interest rate.
There are some serious issues to be aware of when it comes to consumer debt, including:
Nearly 80% of Americans face some level of consumer debt. In recent years, the average American carried $31,560 of consumer debt. New data suggests that consumers are carrying more debt than ever before and will likely continue this trend going into the following decade.
Consumer Debt Law Firm Functions
While it can seem overwhelming, finding oneself in debt does not necessarily mean that the only option is declaring bankruptcy. They may be able to negotiate with their creditors for reduced payment amounts. In order to find out if this is a suitable choice, it’s important for them to contact a law firm that specializes in consumer debt. Such firms help individuals or businesses manage or eliminate debts and liabilities in a number of ways. A consumer debt law firm first investigates a client’s financial status to determine whether negotiating answers or forgiving debts is a viable choice. If so, the firm will represent the client throughout negotiations, often causing creditors to settle for reduced payment amounts or payments over longer periods of time. In addition to negotiating debt or bankruptcy settlements, a firm assists with designing and implementing methods for keeping a client out of debt. These services offer people or businesses that owe debts and payments some hope that they can have a relief of those debts without declaring bankruptcy. When a consumer debt firm helps settle debts, the creditors must comply with certain standards set in the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Bureau (CFPB). These agencies also prevent creditors from employing specific involuntary methods to take the property of an individual or a business that owes a debt. If a creditor violates any of these regulations, the consumer debt firm can seek to protect the rights of the client through legal means. These legal processes comprise the most essential aspects of the law, including settlement, drafting of legal papers and supportive documentation. Because the law has many technicalities that require specialized knowledge, a debtor may not handle payment settlements and other issues without professional help.
Advantages of Employing a Consumer Debt Lawyer
The benefits of hiring a consumer debt attorney are numerous and can have a significant impact on the outcome of your case. For instance, a consumer debt attorney has in-depth knowledge and understanding of consumer debt law, providing you with a level of expertise that is difficult to match. This expertise can help you better navigate the complex legal landscape while successfully avoiding potential pitfalls.
In addition to legal knowledge, a consumer debt attorney also possesses the resources and experience necessary to effectively deal with creditors and debt collectors. Creditors are often aggressive when it comes to collecting on debts, and an inexperienced individual risks becoming a target for more aggressive collection tactics. An attorney’s experience can help you develop a strategy to properly handle these creditor communications and protect your rights. Furthermore, an attorney can help negotiate with creditors to restructure or settle debts, ultimately saving you money and potentially avoiding further litigation.
Finally, hiring a consumer debt attorney can lead to a better financial outcome. A debt attorney can help individuals negotiate more favorable terms when working with creditors, thereby reducing overall debt and allowing individuals to pay less than what would be typically asked of them. Additionally, when it comes to debt lawsuits, an attorney can potentially win judgments in favor of their client.
Overall, hiring a consumer debt attorney can be a smart choice for those with legal issues related to debt. Whether you’re faced with credit card debt, repossessions, wage garnishments or harassment by debt collectors, a consumer debt attorney can be an invaluable asset to help you find a way out of debt.
Selecting the Optimal Consumer Debt Law Firm
When you have reached the point where a consumer debt law firm is needed to help you address your consumer debt issues, there are a few key factors that you should consider so you can select the best possible law firm.
A law firm’s reputation in the community and reviews from consumers can be a great way to gauge whether it is the right firm for your needs. Seek out feedback if you’re able. Also consider how you feel about the firm after you meet with its lawyers and other staff members. You want to hire a law firm that you’re comfortable with and that you believe will work hard on your behalf.
Once you’ve found a few consumer debt law firms you’re considering hiring, find out how much experience the attorneys at each firm have with cases like yours. Things to consider include how many consumer debt cases an attorney has worked on, how long they have practiced law, and what percentage of their practice is dedicated to consumer debt cases . When it comes to selecting a consumer debt law firm, it’s best that you work with someone who has plenty of experience and who focuses his or her practice on consumer debt cases.
Many law firms offer free initial consultations. This is a good way to get an idea of how much a representation will cost before signing a contract. Questions to ask include: What is the law firm’s fee structure? Does the lawyer expect a retainer or payment plan? Some consumer debt law firms work on a contingency basis, meaning that they’ll take a certain percent of the money you may win in your case. Others may charge you by the hour. Make sure to get a clear understanding of the fee structure before signing anything so you know exactly what you’re getting into.
Once you have a few candidates to review, find out if they specialize in consumer debt cases. If a law firm has a solid practice group that focuses primarily on consumer debt, it can lead to more positive outcomes for clients.
Actions to Undertake Prior to Consulting a Law Firm
As with any type of legal representation, there are steps that you as the consumer can take to prepare for your initial meeting with a debt relief law firm. It is important to understand that the initial consultation is a two-way street. This is your opportunity to determine as much as possible if this debt relief law firm is right for you and it is also the debt relief law firm’s opportunity to determine if they can truly assist you with in solving your financial issues.
The first steps that you should take are gathering your financial documents. You should compile the following documents and information: It may seem like a lot of work up-front, especially if your financial situation is in trouble. However, there are a few reasons why we strongly suggest that you compile the above information before your initial meeting: Gathering all of this information is guaranteed to help you, the consumer, make a better educated and informed decision about how to handle your debt and whether a law firm is the right fit for you.
Debunking Prevailing Beliefs About Debt Relief Services
There are a number of misconceptions about the different forms of consumer debt relief. Too many people believed they could work directly with their creditors or that they could settle their debt without the help of a professional. The days of doing this have come to an end. Today there is a process in place that is developed and controlled by the U.S. government. The "bargaining power" of working with your creditor is gone, and while some programs are more effective than others, working with your creditor for a win-win solution is no longer a possibility.
Many people are also not aware that there are various types of debt relief, which include: We will walk you through some of these distinctions to further educate you on the legal guidance that is available and the common misconceptions associated with the different forms of debt relief.
It is a common misconception that debt settlement is the same as debt negotiation, but this is not true. Not all forms of debt negotiation are scams. For example, the debt negotiation program offered by a law firm is a perfectly legitimate and legal way to settle/propose settlement on unsecured debt. Debt settlement on the other hand, refers to the action of settling debts of consumers through the use of a 3rd party intermediary , usually for a fee, without the direct involvement of a lawyer or law firm. The impact of debt settlement does not guarantee dismissal of the debt in full as with the Legitimate Debt Solution Program. With this program, the lawyer or law firm will negotiate directly with the debt collector while controlling the money until the settlement is complete. This ensures that you’re protected from the abuse of consumer debt relief scams.
There are misconceptions common among debt settlement companies that offer clients promises they can’t deliver. There are even some for-profit companies who try to claim they can get your debt lowered and will even use lawyers to initiate those negotiations but be sure you verify the attorney and law firm you’re dealing with because you will find it’s a scam.
For many, bankruptcy is looked down upon as a last resort because of its perceived stigma. However, it’s important to understand that bankruptcy is not necessarily a last resort. Unlike other debt relief options, bankruptcy is a legal proceeding where an individual meets with an attorney and decides to move forward with the process. In most cases, this involves being able to walk away from any debt resulting in a complete debt erasure.